Wednesday, February 3, 2016

Legislators have again proposed changes to the Collateral Source Rule in Wisconsin. This evidentiary rule has been in place in Wisconsin for over 100 years. The rule protects innocent, injured citizens of Wisconsin in their ability to fully recover sums of money they are legally entitled to for their injuries. The changes would do away with that, and allow a wrongdoer to benefit from the fact that the injured party had the foresight to buy health insurance to help cover medical costs. This would be a "windfall" for the wrongdoer and his or her liability carrier.

Below is the letter I sent to Senator Vukmir. I encourage all of you to use this as a template and contact your representatives and oppose changes to the Collateral Source Rule. The proposed changes negatively impact hard working citizens who have paid insurance premiums in order to help with medical costs, especially in the event they are injured by a wrongdoer.

February
3, 2016

Senator Leah Vukmir

131 South, State Capitol

P.O. Box
7882
Madison, WI 53707-7882

RE: SB 22:Collateral Source Bill

Dear Senator Vukmir:

I
am an attorney practicing in Wauwatosa and I am a resident of your District,
residing in Wauwatosa.I am writing you
regarding SB 405, a proposed Bill to abrogate the Collateral Source Rule in
Wisconsin. The purpose of this letter is to provide you with some additional
information regarding this fairly complicated issue in the hopes that you will consider
opposing this legislation in its entirety.

1. Introduction to the “Collateral
Source Rule.”

The
target of this bill is a Wisconsin law known as the “Collateral Source Rule.”
The Collateral Source Rule has been a part of Wisconsin law since at least
1908. Wisconsin courts have long recognized that an injured party has a right
to recover from the wrongdoer “the reasonable value
of the medical treatment reasonably required by the injury.”This rule is based on “Wisconsin’s
significant interests in fully compensating victims of ordinary
negligence.”The “Collateral Source
Rule” prohibits the introduction of the amount actually paid by the injured
party’s health insurer for medical treatment in order to prove “the reasonable
value of medical treatment.”

Those
who advocate for a change in the law characterize this rule as allowing a
“windfall” or “phantom damages” because it allows an injured party to recover
past medical expenses that exceed the amount actually paid by the injured
party’s insurer.This is an incorrect
view of the operation of the collateral source rule that runs counter to the
most recent rulings from the Wisconsin Supreme Court.

The
collateral source rule was recently reaffirmed by all the Justices currently sitting on our Supreme Court in the
decision in Orlowski v. State Farm Ins.
Co., including those Justices with a long history of protecting the
interests of Wisconsin’s business community.In Orlowski, the court
recognized the significant benefits associated with the current rule:

•First, the rule deters
a wrongdoer’s negligent conduct by placing the full cost of the wrongful
conduct on the wrongdoer.

•Second, the rule
assures that the injured party is fully compensated (“The collateral source
rule protects plaintiffs by guarding against the potential misuse of collateral
source evidence to deny the plaintiff full recovery to which he is entitled.”)

•Third, the rule allows
the injured party to receive the benefit of the premiums paid for coverage that
he or she had the foresight to purchase.

In fact, the court in Orlowski
addressed head-on the very argument raised by proponents of this change in
the law, rejecting the “phantom damage” argument based on the recognition that
the injured party has paid premiums for
health insurance coverage and should receive the benefit of these premiums, not
the wrongdoer. There is nothing irrational or unfair about a rule that
prohibits a wrongdoer from benefitting from the planning and foresight of an
injured party, who has the wisdom to plan ahead and purchase insurance. In addition, the proposed elimination of the
collateral source rule will impose a greater burden on the health care
providers that treat the injured party and the insurers that provide their
medical coverage.

2.
How Changing the Law Penalizes Workers with Insurance.

Explaining how the current law works
and how changing the law will penalize those who buy health insurance is best
shown by example. I will compare John, who has health insurance, to Doug, who
does not have health insurance.

John lives is New Berlin and is a
productive member of society who works at Buy Seasons, Inc. John’s employment
with Buy Seasons includes health insurance. As with all workers, John pays
premiums for this health insurance. As John leaves work, he gets into an auto
accident because a drunk driver runs a stop sign. As a result of the accident,
John has to go to the emergency room. The emergency room charges John $10,000
for its services (the reasonable value of its services). John sends the bill to
his health insurance. John’s health insurance pays $7,000 for the emergency
room services because of the premiums John paid for his health insurance and
because this amount was agreed upon by John, through his health insurance, and
the emergency room.

Under the Collateral Source Rule as
it exists today, the auto insurance company for the drunk driver who ran the
stop sign has to pay the reasonable value of the services John received at the
emergency room without regard to what John’s health insurance paid. Stated
another way, the drunk driver cannot argue that he/she should only have to pay
$7,000. Under the Collateral Source Rule, the drunk driver does not get to
benefit from John having worked hard to buy health insurance. Rather, John is
entitled to the full amount charged by the emergency room and the drunk driver
cannot argue that John is entitled to the discounted amount paid by his health
insurance.

SB 22 seeks to change the current
law to penalize John for having worked hard to buy health insurance. Under the
proposed change, the drunk driver would be allowed to argue that John is not
entitled to the full amount billed by the emergency room ($10,000) but rather
is only entitled to the discounted amount paid by John’s health insurance
($7,000). Under the proposed change, the drunk driver benefits from John having
purchased health insurance.

Now let’s compare John’s situation
to Doug, a person who does not work and does not buy health insurance. Doug
gets into the same auto accident and incurs the same $10,000 in expenses from
the emergency room. Comparing Doug to John, Doug would be allowed to recover $10,000
for his medical bills (because he had no health insurance) and there would be
no “Collateral Source” evidence introduced to allow for any reduction in this
recovery. Thus, changing the Collateral
Source Rule penalizes John for working hard to buy health insurance and rewards
Doug for not working hard to buy health insurance.

3. Response
to the Issues Raised in Support of Changing The Law.

Those
advocating for a change in the law cite three reasons. First, the proponents
state that the changing the law will prevent a “windfall” to the injured
victim. Simply stated, this is wrong because the victim has paid thousands if
not tens of thousands of dollars for health insurance premiums. The current law
does not result in a windfall to anyone; rather, the current law is a common
sense way to both prevent a person from being penalized for buying health
insurance and prevent someone who injures another from benefiting from the
injured person’s foresight in buying health insurance. As explained by Justice
David Prosser in 2011, a windfall would occur to a negligent driver and his
auto insurance company if the Collateral Source Rule was changed. In the case
of Fischer v. Steffen, Steffen
injured Fischer in an auto accident. Fischer incurred $12,157 in medical
expenses. All of the medical expenses except $2,157 were paid by Fischer’s
insurance. Steffen argued that he only had to pay the amount not written off by
Fischer’s insurance ($2,157) rather than the amount incurred by Steffen
($12,157). Justice Prosser wrote:

“The most striking fact about this
case is that defendant Steffen caused $12,157.14 in medical expenses to Fischer
but has been relieved of the burden of paying all but $2,157.14 toward these
expenses. As a result, Fischer is being punished for their foresight in
purchasing [ ] insurance with coverage for medical expenses, while Wilson
Mutual (Steffen’s auto insurance company) receives a $10,000 windfall.”

Second, the
proponents state that the current law results in “inflated judgments” that
result in increased insurance rates. There is no evidence to support this
conclusion. The Collateral Source Rule
has existed in Wisconsin for over 100 years and no Wisconsin appellate judge or
Supreme Court justice has ever said that the current law results in “inflated
judgments.”

Third, the proponents state that a
change in the law will bring Wisconsin in line with Indiana, Minnesota and
Ohio. Following that logic, auto insurance premiums would likely increase as
the average auto insurance premium in these three states is higher than
Wisconsin. Specifically, Indiana’s average auto insurance premium is $2.47 per
year less than Wisconsin while Ohio’s and Minnesota’s average auto insurance
premiums are, respectively, $10.96 and $189.18 per year higher than Wisconsin. There is no correlation between the
elimination of the Collateral Source Rule and reduced insurance premiums.

4. Changing the
Collateral Source Rule will have the Unintended Consequence of Increasing the
Costs of Healthcare in Wisconsin.

In addition,
a change in current law will likely have significant consequences for health
care insurers and health care providers in Wisconsin. In most personal injury claims, the interests
of the health care insurers and health care providers are directly aligned with
those of the injured claimant either as a result of their right of subrogation
or their assertion of a lien for recovery of health care expenses.

There
are numerous adverse risks to Wisconsin’s business community that are the
unintended consequences off this proposed change in Wisconsin law. Health
insurers face the very significant risk of greater involvement in personal
injury litigation as a result of expanded written discovery and depositions
seeking information on the basis for their reduced reimbursements. In addition to the costs associated with
this discovery, there is also substantial risk of unwanted disclosure of the confidential negotiations between health
care providers and insurers that form the foundation for the contractually
reduced health insurance payments.
These additional costs and inconvenience will have an adverse impact on
the bottom line for health insurers with subrogated claims. In addition, the proposed legislation creates
additional risk of reduced recovery of claims in settlement or the
extinguishment of subrogated claims after settlement. Reduced
recovery and increased costs will result in increased health insurance premiums
being passed on to your constituents.

Passage of this law will also result in
increased costs to Wisconsin taxpayers.
The costs to the State of Wisconsin Medicaid program in reduced
recoveries of State Medicaid funds through subrogation has been estimated by
representatives of the DOJ and DHS as being “significant” if SB 405 becomes
law. It would be fiscally irresponsible to penalize Wisconsin taxpayers in
an effort to benefit liability insurance carriers in this state.

The
adverse consequences of this legislation will impact not only health insurance
carriers and state taxpayers, but also health care providers. Although the legislation indicates that the
bills and invoices, once submitted, create a presumption that the amount
contained in the bill or invoice represents the reasonable value of the
services provided, this presumption is now easily rebutted by the admission of
the amounts paid by collateral sources, evidence that is currently
inadmissible. Once evidence of
collateral source payments is introduced in the litigation, any presumption of
reasonableness of the amounts billed evaporates, and the issue of
reasonableness becomes a question of fact in the lawsuit. The
consequences for health care providers are significant.

First,
health care providers will be subject to subpoena in every personal injury
claim to testify as to the basis for the amount billed to the patient and also
to testify as to the basis for the contractually negotiated reduced sum paid by
the patient’s insurer. In situations
where there exists no health insurance or where the provider decides to forgo
the submission of the bill to insurance or to government agencies for
reimbursement, the health care provider lien will be subject to attack by both
the defendant and the plaintiff regarding the reasonable value of the
service. Evidence will now be admissible
regarding amounts accepted by the provider from collateral sources such as
insurance carriers and government funded health programs. These adverse consequences will only increase
costs to health care providers and reduce recoveries, which will naturally be
reflected in additional increased costs of healthcare to your constituents.

The
primary entities that benefit from the proposed change in the collateral source
rule are the property and casualty insurers that provide liability coverage to
the negligent parties. The legislation allows the wrongdoer and
his/her insurer to benefit from the planning and foresight of the injured party
and the premium funded benefits negotiated by the injured party’s employer
and/or insurer. Most importantly, it
does so at increased cost and risk to health care insurers and health care
providers in Wisconsin. It is legislation
that, at first blush may seem logical, but in reality is not in the interests
of Wisconsin’s business community or is citizens.

I
apologize for the length of this letter, but I wanted to adequately cover the important
issues surrounding this proposed drastic change in Wisconsin law. I am always willing to sit and answer any
question that you might have regarding any of the issues raised above. Just have your staff contact me and I will
make myself available.

About Me

I am an attorney at the law firm of Aiken & Scoptur, S.C., a personal injury firm. I am also an avid cyclist and founder of the Aiken & Scoptur cycling team.
To date, our team has won zero races, mainly because we race each other for fun and have never entered an official race (though I won a sprint to a traffic sign against my friend Steve). If that changes, I will let you know. I can be contacted by phone at 414-225-0260, and email james@aikenandscoptur.com
Ride safe, enjoy the ride, see you on the road. Yay bikes!
(P.S.- Nothing on this site is intended to be legal advice. These posts are for informational purposes only.)